Layoffs Loom as GSEs Prepare for Reform; Ginnie & MISMO; FHA Short Refi Program Conference Call; Lots of Lender Updates

So is the economy going back down, stable, recovering, or expanding? Place your bets - lots of folks believe we're moving toward expansion right now.

During the last week or so rates went up around the planet. The primary explanation is that growth expectations have increased because of better economic data and the "second stimulus" provided by the US government. But others argue it could be due to higher government deficits. Some forecasters are predicting a 5% 10-yr T-note, which puts mortgage rates into the high 6's. (Is that in your business plan?) The hoped-for good news is that if the economy picks up more steam, as does the employment picture, it could help housing.

You can bet any borrowers or loan agents who didn't lock up already are not happy about being part of this economic experiment. Last week rates were hit with the proposed deal between the White House and some members of Congress to extend Bush-era tax cuts, reduce payroll taxes and renew emergency unemployment benefits. But that is not the only reason rates have gone up. Economists, including the Fed, feel that GDP growth should get a slight boost in 2011. Thursday's weekly first-time unemployment claims for the prior week fell to their lowest reading of the year. This is on top of the potential tax deal that is expected to boost economic growth but also increase the budget deficit - neither of which would help fixed income securities.

Next month the reform plan for Fannie & Freddie is due. A "secure" long-term job at either agency is rare, at best. One ex-agency employee wrote to me Friday and said, "One has to think the Freddie and Fannie layoffs will be in the Sales and Marketing organizations of each entity. Is there really competition for market share between the GSEs anymore, or are they just playing intramurals? And remind me - how many sales reps does the FHA have?  0?  Exactly."

It is rumored that Freddie & Fannie, via the FHFA, are in talks with administration officials to help out in the efforts aimed at reducing loan balances for underwater mortgages. The goal of this would be to reduce the threat to the U.S. housing market from the glut of homeowners believed at risk of default, but F&F have been hesitant for a variety of reasons to join the FHA's ongoing efforts. F&F collect claims from mortgage insurers or force banks to buy back certain loans when a loan defaults, and these options might go away. And if you hold the first lien, wouldn't you want the 2nd lien holder to also sacrifice? "Federal officials estimate that 500,000 to 1.5 million homeowners could benefit from the program-a fraction of the estimated 11 million borrowers who were underwater as of June 30 - 23% of all US households with a mortgage, according to CoreLogic.

A while back Fannie sent out an announcement addressing "Mandatory Pre-filing Mediation Policy for Mortgage Loans in Florida." Fannie Mae is now requiring all parties in the pre-filing mediation process to use eMASON's Clarifire application to manage the Florida pre-filing mediation process. Fannie Mae has also recently issued an announcement on "New Energy Improvement Feature and Other Related Updates" along with selling guide updates. You're best reading the full details: FULL STORY

HUD will be hosting two industry conference calls on FHA Short Refinances to discuss credit underwriting questions and clarify existing guidance.  The calls are 'first come, first served' and are limited to 200 participants each. Both calls will cover the same subject, and participants are invited to choose to attend either one of the scheduled calls. This first is tomorrow at 10:30 AM and 2:30 PM EST, and Thursday at the same times. The call-in number: 888-675-2535, with the conference ID number being 3318839.

Continuing on with agency news, Ginnie Mae joined Fannie & Freddie (yes, they're still two separate companies) by adopting the Mortgage Industry Standards Maintenance Organization's Uniform Loan Delivery Dataset for moving mortgage information to the agencies. Affectionately known as "MISMO", it is a nonprofit subsidiary of the MBA that develops data transfer procedures. Any loans delivered to these government-sponsored enterprises must use the ULDD specifications effective Sept. 11, 2011. Don't say that you didn't have enough warning.

For some reason the mortgage industry already doesn't seem to like Elizabeth Warren. The poor gal has a lot on her plate. Check out THIS STORY

As anticipated, Bank of America - with over $2 trillion (that's trillion with a "t") in servicing, has restarted foreclosure sales, giving attorneys the go-ahead in 16,000 cases this month on vacant and non-owner-occupied properties. The bank has said about one-third of properties are vacant when a foreclosure sale occurs - that is a lot of vacancies! Bank of America previously announced that it had begun resubmitting affidavits in 102,000 cases in 23 states, including South Carolina, where judges sign off on foreclosures. Based on judges' rulings, the sales are now proceeding.

Chase correspondents were told that with Fannie decommissioning DU 8.0 over the weekend, no re-submissions will be permitted. "Loan case files created in DU version 8.1 prior to December 11, 2010 will be able to re-submit to DU version 8.1. All new submissions on or after December 11, 2010 will require the new version DU 8.2. No set delivery cutoff date for loans submitted to DU version 8.0 has been established."

SunTrust changed its Secondary Financing guidelines to allow for prepayment penalty fees up to $500.00. Starting last Friday new guidelines will be implemented for its agency and non-Agency loan programs including agency, agency affordable, agency plus, SunTrust's Key Loan Program, and Portfolio Affordable Housing. SunTrust's Jumbo Solution Second Mortgage product description was "revised to remove the note requiring a 5% reduction to the TLTV on transactions for condominium properties. The 5% reduction is already factored into the TLTV chart for condominiums."

AmTrust notified its brokers of its new maximum extension and maximum lock days, along with providing a series of updates to its seller guides. These included criteria impacting "Additional Assets/Reserves Required, Verbal Verification of Employment, Salary and/or Commission Income with Less Than 25% of Total Income Used for Qualifying, U.S. Citizen Working Abroad, Revolving Debts Calculated in Debt-to-Income Ratio, Foreclosure Credit Policy, Preforeclosure Sale or Short Sale, Personal Gift, Employer's Assistance, Down Payment Requirements, Age of Documents, and Self Employed Borrowers."

CitiMortgage sent its correspondent clients news of a new program (LP for agency jumbo loans), along with a series of credit policy updates. These included adjustments/clarifications to Citi's policies on at-closing principal curtailments, credit inquiries, DU 8.2, LTV's of 95.01-97%, flexible source of funds, verbal VOE timelines, ineligible source of funds, addressing large deposits (I'd like someone to address a large deposit to me!), gifts/grants from non-profits, etc. The bulletin should be read for details - I can't do the 7 pages justice.

Last week Wells Fargo broker clients learned about changes to Wells' policies on the reverse mortgage file flow, how "More Veterans are Exempt from the VA Funding Fee (The borrower is exempt from the VA Funding Fee), Changes to Waiting Periods to Re-establish Credit After Chapter 13 Bankruptcy, Change in the Amount of Revolving Debt to Include in Debt-to-Income (DTI) Ratios, Change to Cash Reserve Requirements for 2-4 Unit Primary Homes, and Change to Acceptable Source of Funds for the Fannie Mae HomePath Program."

On Friday a few banks learned from the FDIC that they were out of business. Paramount Bank, in Michigan, reopened today as Level One Bank (MI). Earthstar Bank (located in PA) was taken over and made a part of Polonia Bank (PA).

Comments about whether or not FICO overlays discriminate against minorities continue. "Regarding the National Community Reinvestment Coalition, and their claims of discrimination, hopefully HUD's response will include an explanation of the use of HUD Compare Ratios used to monitor performance of FHA lenders and their loans underwritten by Direct Endorsement (DE) lenders. As you know, a poor compare ratio can lead to revocation of DE Authority. That helps to explain the reluctance of many lenders and banks to go down to 580 credit scores."

Friday...what happened to the market? Oh yeah, it got worse - this time on very light volume (less than half of the recent average). As I mentioned last week, when rates shoot up, production (locks & hedges) go up. When rates stay up, production will drop - everyone who could lock did, and those that didn't will wait. 10-yr T-notes worsened by about .5, and ended at 3.30%.

So is this what we can expect from QE2? I mentioned a few weeks ago that its goal was inflation - and the bond market has begun to react accordingly. Personally, I think that the market is a little ahead of itself - but what do I know? Last week we had very little scheduled economic news to hang our hats on; this week we have a lot. Tomorrow's FOMC announcement is important, but no one expects any material changes to it, or to overnight rates.

Tomorrow morning we have Retail Sales, expected +0.6%, and PPI expected +.5%. On Wednesday we'll learn what the CPI did in November, along with Industrial Production and Capacity Utilization. We'll see some minor NY Fed and Philly Fed manufacturing numbers, along with Jobless Claims, Housing Starts & Building Permits, and Leading Economic Indicators. HERE is the complete economic calendar

Every once in a while I come across something that is very un-mortgage-like.  It's the Christmas season and that means parties. As a reminder you should be careful and not over-indulge. Please heed the warning this warning: this video is incredibly, extremely difficult to watch for 5 or so minutes but has a very powerful message too important not to pass along. I am sure that I will receive some complaints about it, but this anti-drinking Australian commercial made too big of an impression on me to not provide the link - and you can stop watching it any time you like.  DON'T DRIVE UNDER THE INFLUENCE